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SUPREME COURT OF CANADA
CITATION: McCormick v. Fasken Martineau DuMoulin LLP, 2014
SCC 39
DATE: 20140522
DOCKET: 34997
BETWEEN:
John Michael McCormick
Appellant
and Fasken Martineau DuMoulin LLP
Respondent
- and - Alberta Human Rights Commission, British Columbia Human Rights Tribunal,
Ernst & Young LLP, KPMG LLP, Deloitte LLP, PricewaterhouseCoopers LLP,
BDO Canada LLP, Grant Thornton LLP, Young Bar Association of Montreal,
Ontario Human Rights Commission and Canadian Human Rights Commission
Interveners
CORAM: McLachlin C.J. and LeBel, Abella, Rothstein, Cromwell, Moldaver and Karakatsanis JJ.
REASONS FOR JUDGMENT:
(paras. 1 to 49)
Abella J. (McLachlin C.J. and LeBel, Rothstein, Cromwell,
Moldaver and Karakatsanis JJ. concurring)
NOTE: This document is subject to editorial revision before its reproduction in final
form in the Canada Supreme Court Reports.
MCCORMICK v. FASKEN MARTINEAU DUMOULIN
John Michael McCormick Appellant
v.
Fasken Martineau DuMoulin LLP Respondent
and
Alberta Human Rights Commission,
British Columbia Human Rights Tribunal,
Ernst & Young LLP, KPMG LLP, Deloitte LLP,
PricewaterhouseCoopers LLP,
BDO Canada LLP, Grant Thornton LLP,
Young Bar Association of Montreal,
Ontario Human Rights Commission and
Canadian Human Rights Commission Interveners
Indexed as: McCormick v. Fasken Martineau DuMoulin LLP
2014 SCC 39
File No.: 34997.
2013: December 13; 2014: May 22.
Present: McLachlin C.J. and LeBel, Abella, Rothstein, Cromwell, Moldaver and Karakatsanis JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR BRITISH COLUMBIA
Human rights — Discrimination — Employment — Age — Law firm
partnership agreement containing provision relating to retirement at age 65 —
Equity partner filing complaint with Human Rights Tribunal arguing provision
constituting age discrimination in employment — Whether equity partner engaged in
“employment relationship” for purposes of Human Rights Code — Whether
complaint comes within jurisdiction of Human Rights Tribunal — Human Rights
Code, R.S.B.C. 1996, c. 210, ss. 1, 13 and 27.
M became an equity partner at his law firm in 1979. An equity partner
has an ownership interest in the firm. In the 1980s, the equity partners voted to adopt
a provision in their Partnership Agreement that required equity partners to retire as
equity partners and divest their ownership shares at the end of the year in which they
turned 65. A partner could make individual arrangements to continue working as an
employee or as a “regular” partner without an equity stake, but such arrangements are
stated in the Agreement to be the exception rather than the rule. In 2009, when he was
64, M brought a complaint to the Human Rights Tribunal arguing that this provision
constituted age discrimination in employment, contrary to s. 13(1) of the Human
Rights Code, R.S.B.C. 1996, c. 210 (“Code”).
The law firm applied to have the complaint dismissed on the grounds that
M, as an equity partner, was not in the type of workplace relationship covered by the
Code. The Tribunal concluded that there was an employment relationship. The law
firm’s application for judicial review was dismissed by the B.C. Supreme Court. The
Court of Appeal allowed the appeal, concluding that M, as a partner, was not in an
employment relationship pursuant to the Code.
Held: The appeal should be dismissed.
The Code is quasi-constitutional legislation that attracts a generous
interpretation to permit the achievement of its broad public purposes. Those purposes
include the prevention of arbitrary disadvantage or exclusion based on enumerated
grounds, so that individuals deemed to be vulnerable by virtue of a group
characteristic can be protected from discrimination. The Code achieves those
purposes by prohibiting discrimination in specific contexts. One of these contexts is
employment.
Deciding who is in an “employment relationship” for purposes of the
Code means examining how two synergetic aspects function in an employment
relationship: control exercised by an employer over working conditions and
remuneration, and corresponding dependency on the part of a worker. The test is who
is responsible for determining working conditions and financial benefits and to what
extent does a worker have an influential say in those determinations? The more the
work life of individuals is controlled, the greater their dependency and, consequently,
their economic, social and psychological vulnerability in the workplace.
Control and dependency are a function not only of whether the worker
receives immediate direction from, or is affected by the decisions of others, but also
whether he or she has the ability to influence decisions that critically affect his or her
working life. The answers to these questions represent the compass for determining
the true nature of the relationship. Ultimately, the key is the degree of control and the
extent to which the worker is subject and subordinate to someone else’s
decision-making over working conditions and remuneration.
Applying the control/dependency test to this case, in addition to the right
to participate in the management of the partnership, as an equity partner M benefited
from other control mechanisms, including the right to vote for ― and stand for
election to ― the firm’s Board; the duty that the other partners owed to him to render
accounts; the right not to be subject to discipline or dismissal; the right, on leaving the
firm, to his share of the firm’s capital account; and the protection that he could only
be expelled from the partnership by a special resolution passed by a meeting of all
equity partners and a regional resolution in his region.
As an equity partner, and based on his ownership, sharing of profits and
losses, and the right to participate in management, M was part of the group that
controlled the partnership, not a person vulnerable to its control, and, for over 30
years, benefited financially from the retirement of other partners. In no material way
was M structurally or substantively ever in a subordinate relationship with the other
equity partners. It is true that the law firm had certain administrative rules to which M
was subject, but they did not transform the substance of the relationship into one of
subordination or dependency. This is not to say that a partner in a firm can never be
an employee under the Code, but in the absence of any genuine control of M in the
significant decisions affecting the workplace, there was no employment relationship
between him and the partnership under the provisions of the Code.
The Tribunal therefore had no jurisdiction over M’s relationship with the
partnership.
Cases Cited
Referred to: Crane v. British Columbia (Ministry of Health Services)
(No. 1), 2005 BCHRT 361, 53 C.H.R.R. D/156, rev’d 2007 BCSC 460, 60 C.H.R.R.
D/381; Moore v. British Columbia (Education), 2012 SCC 61, [2012] 3 S.C.R. 360;
British Columbia (Workers’ Compensation Board) v. Figliola, 2011 SCC 52, [2011]
3 S.C.R. 422; Winnipeg School Division No. 1 v. Craton, [1985] 2 S.C.R. 150;
Ontario Human Rights Commission v. Simpsons-Sears Ltd., [1985] 2 S.C.R. 536;
Canadian National Railway Co. v. Canada (Canadian Human Rights Commission),
[1987] 1 S.C.R. 1114; Council of Canadians with Disabilities v. VIA Rail Canada
Inc., 2007 SCC 15, [2007] 1 S.C.R. 650; Zurich Insurance Co. v. Ontario (Human
Rights Commission), [1992] 2 S.C.R. 321; National Bank of Greece (Canada) v.
Katsikonouris, [1990] 2 S.C.R. 1029; University of British Columbia v. Berg, [1993]
2 S.C.R. 353; Canadian Pacific Ltd. v. Canada (Human Rights Commission), [1991]
1 F.C. 571; Pannu v. Prestige Cab Ltd. (1986), 73 A.R. 166; Yu v. Shell Canada Ltd.,
2004 BCHRT 28, 49 C.H.R.R. D/56; Canada (Attorney General) v. Rosin, [1991] 1
F.C. 391; Mans v. British Columbia Council of Licensed Practical Nurses (1990), 14
C.H.R.R. D/221; International Woodworkers of America v. Atway Transport Inc.,
[1989] OLRB Rep. 540; Pointe-Claire (City) v. Quebec (Labour Court), [1997] 1
S.C.R. 1015; York Condominium Corp., [1977] OLRB Rep. 645; Clackamas
Gastroenterology Associates, P. C. v. Wells, 538 U.S. 440 (2003); Backman v.
Canada, 2001 SCC 10, [2001] 1 S.C.R. 367; Boyd v. Attorney-General for British
Columbia (1917), 54 S.C.R. 532; Green v. Harnum, 2007 NLCA 57, 269 Nfld. &
P.E.I.R. 97; Blue Line Hockey Acquisition Co. v. Orca Bay Hockey Ltd. Partnership,
2008 BCSC 27, 40 B.L.R. (4th) 83, aff’d 2009 BCCA 34, 52 B.L.R. (4th) 108; Re
Davies and Council of the Institute of Chartered Accountants of Saskatchewan
(1985), 19 D.L.R. (4th) 447; Coal Harbour Properties Partnership v. Liu, 2004
BCCA 283, 48 B.L.R. (3d) 237; Largie v. TCBA Watson Rice, LLP, 2013 U.S. Dist.
LEXIS 117688; Bowers v. Ophthalmology Group, LLP, 2012 U.S. Dist. LEXIS
118761, rev’d 733 F.3d 647 (2013); Kirleis v. Dickie, McCamey & Chilcote, P.C.,
2009 U.S. Dist. LEXIS 100326; Equal Employment Opportunity Commission v.
Sidley Austin Brown & Wood, 315 F.3d 696 (2002); Ellis v. Joseph Ellis & Co.,
[1905] 1 K.B. 324; Re Thorne and New Brunswick Workmen’s Compensation Board
(1962), 33 D.L.R. (2d) 167, aff’d [1962] S.C.R. viii; Hitchcock v. Sykes (1914), 49
S.C.R. 403; Cameron v. Julien (1957), 9 D.L.R. (2d) 460; Rochwerg v. Truster
(2002), 58 O.R. (3d) 687.
Statutes and Regulations Cited
Administrative Tribunals Act, S.B.C. 2004, c. 45, s. 59.
Age Discrimination Act 2004 (Cth.), No. 68, s. 21.
Anti-Discrimination Act 1977 (N.S.W.), No. 48, ss. 10A, 27A, 49G.
Anti-Discrimination Act 1991 (Qld.), No. 85, ss. 16 to 18.
Disability Discrimination Act 1992 (Cth.), No. 135, s. 18.
Equal Opportunity Act 1984 (S.A.), ss. 33, 55, 70.
Equal Opportunity Act 1984 (W.A.), ss. 14, 40, 66E.
Equal Opportunity Act 2010 (Vic.), No. 16, ss. 30, 31.
Equality Act 2010 (U.K.), 2010, c. 15, s. 44.
Human Rights Act 1993 (N.Z.), 1993, No. 82, s. 36.
Human Rights Code, R.S.B.C. 1996, c. 210, ss. 1 “employment”, “person”, 3, 13, 27(1)(a), (c).
Partnership Act, R.S.B.C. 1996, c. 348, ss. 1 “firm”, 2 “partnership”, 22, 27(e), 28,
31, 104.
Partnership Act 1890 (U.K.), 1890, c. 39.
Sex Discrimination Act 1984 (Cth.), No. 4, s. 17.
Authors Cited
Adams, George W. Canadian Labour Law, 2nd ed. Toronto: Canada Law Book,
1993 (loose-leaf updated December 2013, release 48).
Arthurs, H. W. “The Dependent Contractor: A Study of the Legal Problems of
Countervailing Power” (1965), 16 U.T.L.J. 89.
Davidov, Guy. “The Three Axes of Employment Relationships: A Characterization of Workers in Need of Protection” (2002), 52 U.T.L.J. 357.
England, Geoffrey. Individual Employment Law, 2nd ed. Toronto: Irwin Law, 2008.
Houh, Emily M. S. “Critical Race Realism: Re-Claiming the Antidiscrimination Principle through the Doctrine of Good Faith in Contract Law” (2005), 66 U.
Pitt. L. Rev. 455.
Lindley & Banks on Partnership, 19th ed., by Roderick I’Anson Banks. London: Sweet & Maxwell, 2010.
Manitoba. Law Reform Commission. Good Faith and the Individual Contract of Employment, Report #107. Winnipeg: The Commission, 2001.
Manzer, Alison R. A Practical Guide to Canadian Partnership Law. Toronto: Canada Law Book, 1994 (loose-leaf updated December 2013, release 20).
Sullivan, Ruth. Sullivan on the Construction of Statutes, 5th ed. Markham, Ont.:
LexisNexis, 2008.
VanDuzer, J. Anthony. The Law of Partnerships and Corporations, 3rd ed. Toronto:
Irwin Law, 2009.
APPEAL from a judgment of the British Columbia Court of Appeal
(Finch C.J. and Newbury and Levine JJ.A.), 2012 BCCA 313, 352 D.L.R. (4th) 294,
[2012] 9 W.W.R. 633, 325 B.C.A.C. 216, 34 B.C.L.R. (5th) 160, 100 C.C.E.L. (3d)
196, [2012] B.C.J. No. 1508 (QL), 2012 CarswellBC 2180, setting aside a decision of
Bruce J., 2011 BCSC 713, 335 D.L.R. (4th) 450, 93 C.C.E.L. (3d) 314, 71 C.H.R.R.
D/280, [2011] B.C.J. No. 999 (QL), 2011 CarswellBC 1340. Appeal dismissed.
Murray Tevlin and John Chesko, for the appellant.
Irwin G. Nathanson, Q.C., and Peter Senkpiel, for the respondent.
Arman Mujahid Chak and Audrey Dean, for the intervener the Alberta
Human Rights Commission.
Katherine Hardie, for the intervener the British Columbia Human Rights
Tribunal.
Peter H. Griffin and Rory Gillis, for the interveners Ernst & Young LLP,
KPMG LLP, Deloitte LLP, PricewaterhouseCoopers LLP, BDO Canada LLP and
Grant Thornton LLP.
Written submissions only by Vincent de l’Étoile and Catherine Galardo,
for the intervener the Young Bar Association of Montreal.
Reema Khawja and Anthony D. Griffin, for the intervener the Ontario
Human Rights Commission.
Philippe Dufresne and Valerie Phillips, for the intervener the Canadian
Human Rights Commission.
The judgment of the Court was delivered by
ABELLA J. —
[1] John Michael McCormick became an equity partner at Fasken Martineau
DuMoulin LLP in 1979. In the 1980s, the equity partners — those partners with an
ownership interest in the firm — voted to adopt a provision in their Partnership
Agreement whereby equity partners were to retire as equity partners and divest their
ownership shares in the partnership at the end of the year in which they turned 65. A
partner could make individual arrangements to continue working as an employee or
as a “regular” partner without an equity stake, but such arrangements were stated in
the Agreement to be “the exception”.
[2] In 2009, when he was 64, Mr. McCormick brought a claim alleging that
this provision in the Partnership Agreement constituted age discrimination contrary to
s. 13(1) of the British Columbia Human Rights Code.1
[3] Fasken applied to have the claim dismissed on the grounds that the
complaint was not within the jurisdiction of the tribunal and that there was no
reasonable prospect that the complaint would succeed.2 In its view, Mr. McCormick,
as an equity partner, was not in the type of workplace relationship covered by the
Code.
[4] The issue before this Court, therefore, is how to characterize Mr.
McCormick’s relationship with his firm in order to determine if it comes within the
jurisdiction of the Code over employment. That requires us to examine the essential
character of the relationship and the extent to which it is a dependent one.
1 R.S.B.C. 1996, c. 210.
2 Human Rights Code, s. 27(1)(a) and (c).
[5] At the time this complaint was brought, Fasken had 650 lawyers
worldwide, of whom 260 were equity partners. There were about 60 equity partners
in Fasken’s Vancouver office. Responsibility for the day-to-day running of the
partnership is delegated through the Partnership Agreement to the Partnership Board,
consisting of 13 equity partners, including three from the British Columbia region,
elected to three-year terms by the equity partners. Before the creation of the Board,
this responsibility had been given to the “Executive Committee”. In 1998-1999, Mr.
McCormick served for a year on that committee.
[6] The Board determines the compensation criteria for equity partners.3 The
compensation criteria in place at the relevant time included the quality of the legal
work, teamwork, generation of profitable business from new and existing clients,
profitable maintenance of existing clients, contribution to the firm’s image, reputation
and seniority, profitable personal production, businesslike personal practice
management, contribution to firm activities, ancillary income generated for the firm,
and peer review. A regional compensation committee, comprised of equity partners,
allocates the firm’s profits to the equity partners in the region based on these criteria.
There is a limited right of appeal back to the committee based on information not
available at the time the initial allocation was made.
[7] The Board appoints and gives direction to the firm’s managing partner,
who is responsible for the overall management of the firm and who is accountable to
3 Partnership Agreement, ss. 7.1(b) and 7.4(a).
the Board. The duties of the managing partner include “managing and structuring the
human resources of the Firm, including Partners, associates and staff” and
“delegat[ing] specific functions, responsibilities, authorities and accountabilities to
Regional Managing Partners, committees, task forces, individual Partners or
associates, as appropriate, and supervis[ing] the execution of those tasks”.4 Within the
firm, all management and support staff report directly or indirectly to a chief
operating officer.5 The chief operating officer reports through the firm’s managing
partner to the Board.6
[8] All written opinions given to a client are the opinion of the firm, and must
be reviewed and approved by a partner other than the partner who prepared it. The
firm appoints a “client manager” for each client, who may not be the lawyer who
brought the client to the firm. Each matter the firm handles for a client is overseen by
a “file manager”, who is responsible for ensuring that the matter is efficiently and
properly dealt with. The client manager monitors the performance of the file manager
for each matter. All content produced by lawyers, including equity partners, becomes
the property of the firm. Any income earned by a partner that relates in any manner to
the practice of law is deemed to be property of the firm.7 Partners are prohibited from
entering into financial arrangements or contracts in the name of the firm without the
4 Partnership Agreement, s. 5.3(b) and (g).
5 Partnership Agreement, s. 5.6.
6 Partnership Agreement, s. 5.6.
7 Partnership Agreement, s. 8.4.
authorization of the firm’s managing partner, Board Chair, regional managing partner
or two members of the Board.8
[9] A vote of the equity partnership as a whole is required for such matters as
an amendment to the Partnership Agreement, the admission of a new equity partner,
the expulsion of an equity partner, the dissolution of the firm, the removal of the
managing partner, the opening of a new office, as well as the approval of certain
significant expenses or debts.9
[10] An equity partner also has a capital account with the firm, which is paid
out when he or she leaves the firm.10 The aggregate of the partners’ capital accounts
represents the funding of the partnership. Partners are liable for the debts of the
partnership to the extent that they are not covered by insurance or which the Board
elects to treat as an expense, and as limited by s. 104 of the Partnership Act.11 If the
partnership is dissolved, partners are entitled to receive a share of the assets
remaining after all of the partnership’s debts and obligations are satisfied.
[11] An equity partner like Mr. McCormick has an ownership interest in the
firm. The terms of the Partnership Agreement require that equity partners divest their
ownership shares in the partnership at the end of the year in which they turn 65. All
equity partners are subject to this time limit on their ownership interests in the firm. A
8 Partnership Agreement, s. 3.7.
9 Partnership Agreement, ss. 3.3 and 3.4.
10 Partnership Agreement, s. 9.5.
11 R.S.B.C. 1996, c. 348.
partner may make individual arrangements to continue working as an employee or as
a “regular” partner without an equity stake, but such arrangements are stated in the
Agreement to be “the exception rather than the rule”.12
[12] Mr. McCormick brought a complaint to the British Columbia Human
Rights Tribunal, arguing that this provision of the Partnership Agreement constituted
age discrimination in employment, contrary to s. 13(1) of the Code. Fasken brought
an application to dismiss Mr. McCormick’s claim on the grounds that the Tribunal
did not have jurisdiction over the claim because Fasken was not in an employment
relationship with Mr. McCormick.
[13] In assessing whether Mr. McCormick was in an employment relationship
with the firm, the Tribunal relied on the factors it had developed in Crane v. British
Columbia (Ministry of Health Services)(No. 1) (2005), 53 C.H.R.R. D/156, rev’d on
other grounds (2007), 60 C.H.R.R. D/381 (B.C.S.C.): utilization, control, financial
burden, and remedial purpose. Under the first factor, the Tribunal found that Fasken
“utilized” Mr. McCormick to provide legal services to the firm’s clients and to
generate intellectual property. Under the second, the Tribunal found that Fasken
exercised control over Mr. McCormick through the direction given by managing
partners and client and file managers. With respect to remuneration, the Tribunal
found that despite the fact that the partnership involves sharing profits rather than
paying fixed wages, the firm nevertheless had the burden of determining and paying
12
Partnership Agreement, s. 9.2.
Mr. McCormick’s compensation. Finally, the Tribunal concluded that allegations that
Fasken treated Mr. McCormick differently because of his age engaged the broad
remedial purposes of the Code. It concluded that there was therefore an employment
relationship and dismissed Fasken’s application. Fasken’s application for judicial
review was dismissed by the B.C. Supreme Court.
[14] The B.C. Court of Appeal allowed Fasken’s appeal, concluding that Mr.
McCormick, as a partner, was not in an employment relationship pursuant to the
Code. It held that because a partnership is not, in law, a separate legal entity from its
partners, it is a legal impossibility for a partner ever to be “employed” by a
partnership of which he or she is a member.
[15] For the reasons that follow, I agree with the Court of Appeal that the
Tribunal’s decision was incorrect and that the Tribunal had no jurisdiction over Mr.
McCormick’s relationship with the firm, but do not accept that a partner can never be
an employee for purposes of the Code. The key is the degree of control and
dependency.
Analysis
[16] In the prior proceedings, the parties did not dispute that the standard of
review was correctness. Since the issue does not deal with a finding of fact or the
exercise of the Tribunal’s discretion, under s. 59 of the B.C. Administrative Tribunals
Act13 a correctness standard is mandated: Moore v. British Columbia (Education),
[2012] 3 S.C.R. 360, at paras. 55-57; British Columbia (Workers’ Compensation
Board) v. Figliola, [2011] 3 S.C.R. 422, at paras. 18-20.
[17] The Code is quasi-constitutional legislation that attracts a generous
interpretation to permit the achievement of its broad public purposes: Winnipeg
School Division No. 1 v. Craton, [1985] 2 S.C.R. 150; Ontario Human Rights
Commission v. Simpsons-Sears Ltd., [1985] 2 S.C.R. 536, at p. 547, per McIntyre J.;
Canadian National Railway Co. v. Canada (Canadian Human Rights Commission),
[1987] 1 S.C.R. 1114, at pp. 1133-36; Council of Canadians with Disabilities v. VIA
Rail Canada Inc., [2007] 1 S.C.R. 650.
[18] Those purposes include the prevention of arbitrary disadvantage or
exclusion based on enumerated grounds, so that individuals deemed to be vulnerable
by virtue of a group characteristic can be protected from discrimination.
[19] The Code achieves those purposes by prohibiting discrimination in
specific contexts. One of those contexts is “employment”. The definition of
employment must be approached consistently with the generous, aspirational
purposes set out in s. 3 of the Code and understood in light of the protective nature of
human rights legislation, which is “often the final refuge of the disadvantaged and the
disenfranchised” and of “the most vulnerable members of society”: Zurich Insurance
Co. v. Ontario (Human Rights Commission), [1992] 2 S.C.R. 321, at p. 339. This is
13
S.B.C. 2004, c. 45.
the philosophical framework for ascertaining whether a particular workplace
relationship represents the kind of vulnerability the Code intended to bring under its
protective scope.
[20] Mr. McCormick’s claim was based on age, an enumerated ground, and
was brought under s. 13 of the Code, which states:
13 [Discrimination in employment] (1) A person must not
(a) refuse to employ or refuse to continue to employ a person, or
(b) discriminate against a person regarding employment or any
term or condition of employment
because of the race, colour, ancestry, place of origin, political
belief, religion, marital status, family status, physical or mental disability, sex, sexual orientation or age of that person or because that person has been convicted of a criminal or summary
conviction offence that is unrelated to the employment or to the intended employment of that person.
. . .
(3) Subsection (1) does not apply
(a) as it relates to age, to a bona fide scheme based on
seniority, or
(b) as it relates to marital status, physical or mental disability, sex or age, to the operation of a bona fide retirement, superannuation or pension plan or to a bona fide group or
employee insurance plan, whether or not the plan is the subject of a contract of insurance between an insurer and an
employer.
(4) Subsections (1) and (2) do not apply with respect to a refusal, limitation, specification or preference based on a bona fide occupational requirement.
“Employment” and “person” are defined in s. 1 as follows:
“employment” includes the relationship of master and servant, master and
apprentice and principal and agent, if a substantial part of the agent's services relate to the affairs of one principal, and “employ” has a corresponding meaning;
. . .
“person” includes an employer, an employment agency, an employers'
organization, an occupational association and a trade union;
[21] While the starting point of the analysis is found in the legislative
language of “master and servant”, “master and apprentice”, and “principal and agent”,
it is important to note that the definition of employment “includes” these
relationships, but is not restricted to them (Ruth Sullivan, Sullivan on the
Construction of Statutes (5th ed. 2008), at p. 239; National Bank of Greece (Canada)
v. Katsikonouris, [1990] 2 S.C.R. 1029, at p. 1041). Moreover, relying on a
formalistic approach to a “master and servant” relationship, resurrects an unduly
restrictive traditional test for employment (H. W. Arthurs, “The Dependent
Contractor: A Study of the Legal Problems of Countervailing Power” (1965), 16
U.T.L.J. 89; George W. Adams, Canadian Labour Law (2nd ed. (loose-leaf)), at p. 6-
35). At the same time, the relationships which are deemed to be included should be
analogous to those set out in the definition. As this Court said in University of British
Columbia v. Berg, [1993] 2 S.C.R. 353: “It is the duty of boards and courts to give
[provisions] a liberal and purposive construction, without reading the limiting words
out of the Act or otherwise circumventing the intention of the legislature” (p. 371).
[22] The jurisprudence confirms that there should be an expansive approach to
the definition of “employment” under the Code. Independent contractors, for
example, have been found to be employees for purposes of human rights legislation,
even though they would not be considered employees in other legal contexts:
Canadian Pacific Ltd. v. Canada (Human Rights Commission), [1991] 1 F.C. 571
(C.A.); Pannu v. Prestige Cab Ltd. (1986), 73 A.R. 166 (C.A.); Yu v. Shell Canada
Ltd. (2004), 49 C.H.R.R. D/56 (B.C.H.R.T.). See also Canada (Attorney General) v.
Rosin, [1991] 1 F.C. 391 (C.A.); Mans v. British Columbia Council of Licensed
Practical Nurses (1990), 14 C.H.R.R. D/221 (B.C.C.H.R.).
[23] Deciding who is in an employment relationship for purposes of the Code
means, in essence, examining how two synergetic aspects function in an employment
relationship: control exercised by an employer over working conditions and
remuneration, and corresponding dependency on the part of a worker. In other words,
the test is who is responsible for determining working conditions and financial
benefits and to what extent does a worker have an influential say in those
determinations? The more the work life of individuals is controlled, the greater their
dependency and, consequently, their economic, social and psychological vulnerability
in the workplace: Guy Davidov, “The Three Axes of Employment Relationships: A
Characterization of Workers in Need of Protection” (2002), 52 U.T.L.J. 357, at pp.
377-94; Arthurs, at pp. 89-90; International Woodworkers of America v. Atway
Transport Inc., [1989] OLRB Rep. 540; Pointe-Claire (City) v. Quebec (Labour
Court), [1997] 1 S.C.R. 1015.
[24] The test applied by the Human Rights Tribunal in British Columbia for
determining whether someone is in an employment relationship under the Code was
developed in Crane, where it identified the following indicia:
a. “Utilization” — this . . . looks to the question of whether the alleged
employer “utilized” or gained some benefit from the employee in question;
b. Control — did the alleged employer exercise control over the
employee, whether in relation to the determination of his or her wages
or other terms and conditions of employment, or in relation to their work more generally, such as the nature of the work to be performed
or questions of discipline and discharge? c. Financial burden — did the alleged employer bear the burden of
remuneration of the employee? and d. Remedial purpose — does the ability to remedy any discrimination lie
with the alleged employer? [para. 79]
This test too is, in essence, a control/dependency test. The concepts of utilization,
control, financial burden, as well as the ability of the employer to remedy any
discrimination, all ultimately relate to whether the employer controls working
conditions and remuneration, resulting in dependency on the part of the employee.
[25] Placing the emphasis on control and dependency in determining whether
there is an employment relationship is consistent with approaches taken to the
definition of employment in the context of protective legislation both in Canada and
internationally: Davidov, at pp. 365-71. The Ontario Labour Relations Board, for
example, uses a seven-factor test for determining if an employment relationship
exists, based on indicia that relate mainly to control and economic dependency.
Among other criteria, the Board asks whether the alleged employer exercises
direction and control over the performance of work; imposes discipline; has the
authority to dismiss employees; bears the burden of remuneration; and is perceived to
be the employer (York Condominium Corp., [1977] OLRB Rep. 645; Adams, at p. 6-
36). That said, while significant underlying similarities may exist across different
statutory schemes dealing with employment, it must always be assessed in the context
of the particular scheme being scrutinized.
[26] While the specific indicia used in other jurisdictions may vary from those
adopted by Canadian authorities, the consistent animating themes are control and
dependency. For example, in Clackamas Gastroenterology Associates, P. C. v. Wells,
538 U.S. 440 (2003), a case that required the U.S. Supreme Court to define who is an
employee under the Americans with Disabilities Act of 1990 (104 Stat. 327, as
amended, 42 U.S.C. § 12101 et seq.), the court relied on the following
control/dependency factors:
“Whether the organization can hire or fire the individual or set the rules and regulations of the individual’s work
“Whether and, if so, to what extent the organization supervises the individual’s work
“Whether the individual reports to someone higher in the organization “Whether and, if so, to what extent the individual is able to influence the
organization
“Whether the parties intended that the individual be an employee, as expressed in written agreements or contracts
“Whether the individual shares in the profits, losses, and liabilities of the organization”. EEOC Compliance Manual § 605: 0009. [pp. 449-50]
[27] Control and dependency, in other words, are a function not only of
whether the worker receives immediate direction from, or is affected by the decisions
of others, but also whether he or she has the ability to influence decisions that
critically affect his or her working life. The answers to these questions represent the
compass for determining the true nature of the relationship.
[28] While control and dependency define the essence of an employment
relationship for purposes of human rights legislation, this does not mean that other
indicia that courts and tribunals have developed, such as the Crane factors, are
unhelpful in assessing the extent to which control and dependency are present. But
such factors are unweighted taxonomies, a checklist that helps explore different
aspects of the relationship. While helpful in framing the inquiry, they should not be
applied formulaically. What is more defining than any particular facts or factors is the
extent to which they illuminate the essential character of the relationship and the
underlying control and dependency. Ultimately, the key is the degree of control, that
is, the extent to which the worker is subject and subordinate to someone else’s
decision-making over working conditions and remuneration: Geoffrey England,
Individual Employment Law (2nd ed. 2008), at p. 19.
[29] This brings us to partnerships generally. British Columbia’s Partnership
Act is modeled on the U.K. Partnership Act 189014 (Alison R. Manzer, A Practical
Guide to Canadian Partnership Law (loose-leaf), at p. 1-2). Section 1 states that
“‘firm’ is the collective term for persons who have entered into partnership with one
another”. Section 2 defines a partnership as “the relation which subsists between
persons carrying on business in common with a view of profit”. Accordingly, a
partnership is by its nature an entrepreneurial relationship among individuals agreeing
to do business together.
[30] The conventional view of a partnership was famously described in
Lindley & Banks on Partnership (19th ed., 2010) as a collection of partners, rather
than a distinct legal entity separate from the parties who are its members:
The law, ignoring the firm, looks to the partners composing it; any change amongst them destroys the identity of the firm; what is called the
property of the firm is their property, and what are called the debts and liabilities of the firm are their debts and their liabilities. [para. 3-04]
(Cited with approval in Backman v. Canada, [2001] 1 S.C.R. 367, at para
41. See also Boyd v. Attorney-General for British Columbia (1917), 54
S.C.R. 532; Green v. Harnum (2007), 269 Nfld. & P.E.I.R. 97
(N.L.C.A.); Blue Line Hockey Acquisition Co. v. Orca Bay Hockey Ltd.
14
1890, c. 39.
Partnership (2008), 40 B.L.R. (4th) 83 (B.C.S.C.), at paras. 79-89, aff’d
by (2009), 52 B.L.R. (4th) 108 (B.C.C.A.); Re Davies and Council of the
Institute of Chartered Accountants of Saskatchewan (1985), 19 D.L.R.
(4th) 447 (Sask. Q.B.), at pp. 451-53; Coal Harbour Properties
Partnership v. Liu (2004), 48 B.L.R. (3d) 237 (B.C.C.A.), at para. 10.)
[31] Among the distinctive features of a partnership is that partners generally
have a right to participate meaningfully in the decision-making process that
determines their workplace conditions and remuneration (J. Anthony VanDuzer, The
Law of Partnerships and Corporations (3rd ed. 2009), at p. 75; Partnership Act, s.
27(e)). This is reflected in, for example, the duty to render accounts to other partners
in order to permit them to have the information they need to participate in workplace
decisions and ensure that their interests are adequately considered. This duty is set out
in s. 31 of the Partnership Act:
31 Partners are bound to render true accounts and full information of all things affecting the partnership to any partner or his or her legal
representatives.
[32] Partnership agreements also typically create a high threshold for
expulsion and, unless the agreement explicitly provides otherwise, a partner cannot be
expelled by a simple majority of partners (Partnership Act, s. 28). The Fasken
Partnership Agreement, for example, requires a special resolution passed by a
meeting of all equity partners, as well as a regional resolution in the partner’s
region.15 When partners do leave a partnership, they are entitled to be paid their share
of the partnership’s capital account: VanDuzer, at p. 73; Partnership Agreement, s.
9.5.
[33] In other words, the control over workplace conditions and remuneration is
with the partners who form the partnership. In most cases, therefore, partners are not
employees of the partnership, they are, collectively, the employer.
[34] American courts have generally found that partnerships are not
employment relationships under anti-discrimination legislation since even in a large
partnership, partners are typically able to influence the running of the partnership to a
significant extent: Largie v. TCBA Watson Rice, LLP, 2013 U.S. Dist. LEXIS 117688
(D.N.J.); Bowers v. Ophthalmology Group, LLP, 2012 U.S. Dist. LEXIS 118761
(W.D. Ky.), rev’d on other grounds 733 F.3d 647 (6th Cir. 2013); Kirleis v. Dickie,
McCamey & Chilcote, P.C., 2009 U.S. Dist. LEXIS 100326 (W.D. Pa.), at [*82]. In
Clackamas, however, the U.S. Supreme Court specifically left open the possibility
that nominal “partners” could still be considered employees in exceptional
circumstances based on an assessment of the substance of the relationship (p. 446; see
also Equal Employment Opportunity Commission v. Sidley Austin Brown & Wood,
315 F.3d 696 (7th Cir. 2002), at p. 702-707).
[35] Canadian and British courts have similarly held that partnerships are not
relationships of employment for purposes of other forms of protective legislation,
15
Partnership Agreement, s. 3.3.
such as in the realm of workers’ compensation: Ellis v. Joseph Ellis & Co., [1905] 1
K.B. 324 (C.A.); Re Thorne and New Brunswick Workman’s Compensation Board
(1962), 33 D.L.R. (2d) 167 (N.B.S.C. (App. Div.)), aff’d [1962] S.C.R. viii.
[36] This does not mean human rights legislation cannot apply to partnerships,
it means that an express statutory provision is usually required, as is found in s. 44 of
the U.K. Equality Act 2010, 2010, c. 15. The Explanatory Note to that provision states
that a separate provision protecting partners from discrimination was necessary
because their relationship with their partnership is not one of employment:
Because partners are mainly governed by their partnership agreements, rather than by employment contracts, separate provisions are needed to
provide protection from discrimination, harassment and victimisation for partners in ordinary and limited partnerships. [para. 158]
[37] Partnership is also designated as a separate category from
employer/employee relationships in anti-discrimination legislation in Australia and
New Zealand: Sex Discrimination Act 1984 (Cth.), No. 4, s. 17; Disability
Discrimination Act 1992 (Cth.), No. 135, s. 18; Age Discrimination Act 2004 (Cth.),
No. 68, s. 21; Anti-Discrimination Act 1977, (N.S.W.), No. 48, ss. 10A, 27A and
49G; Anti-Discrimination Act 1991 (Qld.), No. 85, ss. 16 to 18; Equal Opportunity
Act 1984 (S.A.) ss. 33, 55 and 70; Equal Opportunity Act 2010, (Vic.), No.16, ss. 30
and 31; Equal Opportunity Act 1984, (W.A), ss. 14, 40 and 66E; Human Rights Act
1993, (N.Z.), 1993, No. 82, s. 36.
[38] While the structure and protections normally associated with equity
partnerships mean they will rarely be employment relationships for purposes of
human rights legislation, this does not mean that form should trump substance. In this
case, for example, the Court of Appeal appeared to focus exclusively on partnership
as a legal concept, rather than examining the substance of the actual relationship and
the extent to which control and dependency played a role.
[39] Turning to Mr. McCormick’s relationship with his partnership and
applying the control/dependency test, based on his ownership, sharing of profits and
losses, and the right to participate in management, I see him more as someone in
control of, rather than subject to, decisions about workplace conditions. As an equity
partner, he was part of the group that controlled the partnership, not a person
vulnerable to its control.
[40] It is true that Fasken had certain administrative rules to which Mr.
McCormick was subject, but they did not transform the substance of the relationship
into one of subordination or dependency. Management and compensation committees
are necessary mechanisms to implement and coordinate the firm’s policies, not
limitations on a partner’s autonomy. Fasken’s Board, regional managing partners,
and compensation committees were all directly or indirectly accountable to, and
controlled by, the partnership as a whole, of which Mr. McCormick was a full and
equal member. Under the Partnership Agreement, most major decisions, including
those relating to the firm’s mandatory retirement policy, were subject to a vote of the
partnership, in which all partners, including Mr. McCormick, had an equal say.16 Mr.
McCormick was an equity partner when the current retirement policy was adopted,
and was entitled to vote on the very policy that he is now challenging.
[41] In addition to the right to participate in the management of the
partnership, as an equity partner Mr. McCormick benefited from other control
mechanisms, including the right to vote for — and stand for election to — the firm’s
Board; the duty that the other partners owed to him to render accounts; the right not to
be subject to discipline or dismissal; the right, on leaving the firm, to his share of the
firm’s capital account; and the protection that he could only be expelled from the
partnership by a special resolution passed by a meeting of all equity partners and a
regional resolution in his region, arguably giving him tenure since there is no
evidence of any equity partners being expelled from this partnership.
[42] Nor was Mr. McCormick dependent on Fasken in a meaningful sense. It
is true that his remuneration came exclusively from the partnership, but this
remuneration represented his share of the profits of the partnership in accordance with
his ownership interest. The partnership was run for the economic benefit of the
partners, including Mr. McCormick. While the financial proceeds of Mr.
McCormick’s work were pooled with those of other lawyers in the firm, and the
distribution of profits was ultimately determined by internal committees, these
committees applied criteria that were designed to measure the partner’s contribution
16
Partnership Agreement, s. 3.2.
to the firm. Mr. McCormick drew his income from the profits of the partnership and
was liable for its debts and losses. In addition, he had a capital account and was
entitled to share in the partnership’s assets if it dissolved. In effect, Mr. McCormick
was not working for the benefit of someone else, as the Tribunal’s reasons suggest, he
was, as an equity partner, in a common enterprise with his partners for profit, and was
therefore working for his own benefit.
[43] Finally, it must be observed that in order to change the firm’s mandatory
retirement policy, all of Fasken’s equity partners would have been entitled to vote.
Responsibility for remedying any alleged inequity thus lay in the hands of Mr.
McCormick as much as any other equity partner. Instead, he financially benefited for
over 30 years from the retirement of the other partners. In fact, in no material way
was Mr. McCormick structurally or substantively ever in a subordinate relationship
with the other equity partners.
[44] I appreciate that the Tribunal sought, through the application of the Crane
factors, to assess Mr. McCormick’s relationship with his firm, but in so doing, it paid
insufficient attention to whether he was actually subject to the control of others and
dependent on them. It assessed “control”, for example, in terms of some
administrative restrictions on partners rather than examining the underlying power
dynamics of the relationship. And it found that Mr. McCormick was “utilized” and
“remunerated” by Fasken, while disregarding the fact that the firm was run for the
benefit of, and by, its equity partners, including Mr. McCormick.
[45] In the absence of any genuine control over Mr. McCormick in the
significant decisions affecting the workplace, there cannot, under the Code, be said to
be an employment relationship with the partnership. Far from being subject to the
control of Fasken, Mr. McCormick was among the partners who controlled it from
1979, when he became an equity partner, until he left in 2012. The Tribunal therefore
erred in concluding that it had jurisdiction over his relationship with the partnership.
[46] This is not to say that a partner in a firm can never be an employee under
the Code, but such a finding would only be justified in a situation quite different from
this case, one where the powers, rights and protections normally associated with a
partnership were greatly diminished.
[47] But the fact that a partner like Mr. McCormick has no remedy under the
Code does not necessarily mean that partners have no recourse for claims of
discrimination. One of the duties partners owe each other is the duty of utmost
fairness and good faith, set out in s. 22 of the Partnership Act:
22 (1) A partner must act with the utmost fairness and good faith towards the other members of the firm in the business of the firm.
(2) The duties imposed by this section are in addition to, and not in derogation of, any enactment or rule of law or equity relating to
the duties or liabilities of partners.
[48] This duty is an important source of protection for partners: Hitchcock v.
Sykes (1914), 49 S.C.R. 403, at p. 407; Cameron v. Julien (1957), 9 D.L.R. (2d) 460
(Ont. C.A.); Rochwerg v. Truster (2002), 58 O.R. (3d) 687 (C.A.). While this case
does not require us to decide the point, the duty of utmost good faith in a partnership
may well capture some forms of discrimination among partners that represent
arbitrary disadvantage: see Manitoba Law Reform Commission, Good Faith and the
Individual Contract of Employment, Report #107 (2001), at pp. 22 and 32-33; Emily
M. S. Houh, “Critical Race Realism: Re-Claiming the Antidiscrimination Principle
through the Doctrine of Good Faith in Contract Law” (2005), 66 U. Pitt. L. Rev. 455.
That said, absent special circumstances, it is difficult to see how the duty of good
faith would preclude a partnership from instituting an equity divestment policy
designed to benefit all partners by ensuring the regenerative turnover of partnership
shares.
[49] The appeal is dismissed with costs.
Appeal dismissed with costs.
Solicitors for the appellant: TevlinGleadle Employment Law Strategies,
Vancouver.
Solicitors for the respondent: Nathanson Schachter & Thompson,
Vancouver.
Solicitor for the intervener the Alberta Human Rights
Commission: Alberta Human Rights Commission, Edmonton.
Solicitor for the intervener the British Columbia Human Rights Tribunal:
British Columbia Human Rights Tribunal, Vancouver.
Solicitors for the interveners Ernst & Young LLP, KPMG LLP, Deloitte
LLP, PricewaterhouseCoopers LLP, BDO Canada LLP and Grant Thornton
LLP: Lenczner Slaght Royce Smith Griffin, Toronto.
Solicitors for the intervener the Young Bar Association of
Montreal: Langlois Kronström Desjardins, Montréal.
Solicitor for the intervener the Ontario Human Rights
Commission: Ontario Human Rights Commission, Toronto.
Solicitor for the intervener the Canadian Human Rights
Commission: Canadian Human Rights Commission, Ottawa.